Company Notes 2018.01.26

iCapital.biz Q2 FY2018 Results

The KLCI only includes the 30 largest companies in the Malaysian stock market. The only criterion for a stock to be included in the KLCI is the company’s market capitalisation, with no consideration given to the company’s fundamentals. This selection methodology is totally different from icapital.biz Berhad’s value investing strategy. Besides, the KLCI is a 100% equity only index, but icapital.biz Berhad’s is permitted to be 100% invested in equities or to be 0% invested in equities. GIPS or the Global Investment Performance Standards recommends that an appropriate benchmark must reflect the investment mandate, objective, or strategy of the portfolio.

Based on this, there is no suitable benchmark for icapital.biz Berhad considering its long-term absolute return objective and eclectic value investing strategy. Considering the nature of icapital.biz Berhad and how KLCI is constructed, I am of the opinion that the most appropriate benchmark would be the yield of the 5-year Malaysian government bond.

For the quarter ended 30th November 2017, the cash holdings of icapital.biz Berhad have fallen further as we have bought some shares. Finding attractive stocks to invest with sufficient margin of safety remains our focus.


UCrest Q2 FY2018 Results

Palette has moved into the medtech space with the significant investment made over the past few years on the development of imedic, the mobile health system. imedic enable patients to have wireless medical devices at home or anywhere, to regularly make measurement and upload the vital sign data to the Cloud. This would allow doctors from anywhere in the world to have access to the patient’s data 24×7 to review and provide online consultation to the patients. More than 15 devices have been developed to connect to imedic including CPAP machines for sleep apnea patients. The Company will continue to invest in the innovation and development of its next generation of imedic with extensive artificial intelligence (AI) technologies performing analytic on the “Big Data” of the patients and make useful recommendation of diagnosis and treatment plan to the doctors and patients.

The Company has effectively combined the latest innovative technologies: medtech, AI and Big Data in imedic. The power to be unleashed from these 3 technologies could be enormous.


CapitaLand Malaysia Mall Trust Q4 FY2017 Results

The decrease was mainly due to negative rental reversions from Sungei Wang (SW), as SW continues to be affected by the closure of BB Plaza. Lower gross revenue was recorded for The Mines (TM) mainly due to lower rental rates and occupancy whilst lower gross revenue in Tropicana City Property (TCP) was mainly due to lower occupany at the office tower and softer demand for promotional space at the mall. The decrease was mitigated by better performance from Gurney Plaza (GP) and East Coast Mall (ECM) on the back of higher rental rates and gross turnover rent.


Pensonic Q2 FY2018 Results

The Group is developing our Digital Customer Relationship Management. The objective of the platform is to provide customers with direct after-sales service solutions with easier online service calls, marketing automation, e-commerce, royalty programme and smart appliance management.

The Group has also started our e-commerce and partnership with various reputable marketplaces, as well as TV shopping channels. We have seen significant improvement in revenue. However, it is still minimal comparing to the total group revenue. With the e-commerce platform, we will be developing our Online-To-Offline commerce with our existing dealers to create a win-win business solution in this trending e-commerce market. We are expecting a full force digital marketing by end of the 2018.

On top of that, the Group is in the process of securing 2 new distributorships of electrical appliances brands from United Kingdom. These distributorships cover Malaysia and Singapore and is anticipated to contribute to Group revenue in mid to long term.


Suiwah Q2 FY2018 Results

The Group will continue to seek further opportunities to embrace Retail 4.0 (Industrial Automation) by leveraging technology and reinventing value add offerings, which we expect the momentum to be sustained going into 2018.

Manufacturing revenue was slow this quarter due to delay in some customers’ product launch. The new expansion project at Batu Kawan is progressing well and is as per schedule to be completed by next quarter.

GHL to offer Alipay services in Philippines

“The company started with Alipay in 2016 in Thailand and Malaysia in April 2017 and now with the Philippine market, GHL looked to expanding further to the region as Alipay’s key Asean partner.”

To date, GHL Thailand has enabled over 900 merchant acceptance points and GHL Malaysia has enable 5,400 acceptance points in the hotels, retail chain stores, convenience stores and F&B space which has high Chinese tourist foot traffic.

GHL said 810,807 tourists from China visited the Philippines during the first 10 months of 2017, compared to the whole of 2016, which totalled 675,663.

“With the implementation of the visa upon arrival programme in the Philippines, it is expected to grow further. This bodes well for Philippine businesses and merchants as Chinese tourists generally carry the Alipay mobile wallet.”


Texchem to open 80 more Sushi King outlets by 2021

“This year, the capital expenditure of the group is planned to be around RM35mil, of which RM30mil is for the restaurant division while the remaining RM5mil will go to the industrial and polymer engineering divisions. There are presently 19 Yoshinoya and Hanamaru restaurants nationwide. Subsequently, there will be 20 new Sushi King restaurants opened each year until 2021.” Konishi said the group would also this year set up five new Yoshinoya and Hanamaru restaurants, costing about RM750,000 each.

“The polymer engineering division makes semiconductor trays and packaging for hard-disk drive. There are plans to diverse into manufacturing products to support the medical device and life science industries.”


Mexter’s healthcare business takes off

“The healthcare industry is a comparatively stable market and is anticipated to compensate for business cycle fluctuations. Mexter has chosen mother-and-child-related healthcare services as its maiden focus in the healthcare segment as Malaysia has a relatively young demographic, which makes this sub-segment an attractive business proposition with good long-term viability”

“This would make Mexter the first listed company in Malaysia (and globally to the best of our knowledge) to have postpartum care as its primary business,” CIMB Research stated.


IoT solution is Mikro MSC’s new growth driver

The new IoT solution would be a preventive solution for its consumers, as the real-time data and information collected could indicate if there are any possible defects. “For example, if the heat being released is more than usual, it could be an indicator that some parts have aged or need replacements. This helps avoid any disruption to our customers,” Fong added.

“It has taken longer than we expected to move to the new factory due to some approvals [that needed to be obtained]. Nonetheless, we are looking to complete the move by the first half of this year. Once all the new machines and automation are set in the new factory, they will also help enhance the efficiency of our operation. All these will eventually add to the bottom line moving forward.”


Saudee’s food service revamped

“We cannot keep operating a business-as-usual mode and expect to see changes in our earnings,” said Chong. Early last year, the group pulled up its underrated food service segment — involving the supply of ready-to-eat food products to restaurant chains — a non-core unit under the FPP sector, which was given a new lease of life. Chong said the measures were put in place in the second half of FY17.

“People tell us to sell cheap, but we don’t want to be branded in that category. We had no choice but to refocus on food service. The original equipment manufacturing (OEM) and exports under the FPP segment would remain. We want to do premium products only,” he added.

Saudee is also in discussions with a distributor in Japan to expand its food service business there. The group only supplies one OEM brand to Japan. Chong said more than 90% of its revenue is derived from Malaysia, with the FPP and trading segments contributing equally. Within the FPP, Saudee’s “own brand” product section makes up almost 80% of the business unit’s revenue.

“We are chopping the volume of trading tremendously because we don’t believe in that so much. It has incurred losses in the past. It gives revenue but not profit. We cannot control forex … it is unpredictable. We have to buy food products with cash. We have no time to react to forex [fluctuations]. It is like a hedging gambling business, which we don’t want to engage much in,” he said.


Perodua, Proton to be hit most by lending guidelines

“The continued high rejection rate for loan approvals will still be among the most difficult challenges not just for consumers but car companies,” MAA president Datuk Aishah Ahmad told a media briefing. “Excluding luxury vehicle sellers, as their markets have the money to easily buy their products, it’s the local players which will be affected the most.” Aishah pointed out two prevailing issues which could reinforce more stringent lending practices, namely the implementation of the Malaysian Financial Reporting Standards 9 (MFRS 9) since Jan 1, 2018, as well as the high household debt levels.


Ireka joins China firms to explore driverless rail transit

CRRC UT president Gu Yifeng said the ART system, developed by China-based CRRC Group, is already operating in Zhuzhou, China and the company intends to make Malaysia a springboard to the rest of Southeast Asia. “Why we chose Ireka? From what we have seen, Ireka has been in the construction industry for the past 50 years and it has a strong technical capability, focusing on professionalism,” he told a news conference after the MoU signing ceremony yesterday. Our investment in Ireka was a good start for both companies to create a synergistic collaboration and investment. If the Malaysian market requires us to invest more, we will definitely do so.”

“Construction still accounts for almost 90% of our turnover and our outstanding order book currently stands at about RM400 million, which should keep us busy for two years.”


Stronger ringgit good for F&N as net importer

“A stronger ringgit is definitely good for the group and its overall business. For example, we import a lot of dairy products, especially raw materials, from several foreign countries and transactions are predominantly done in the US dollar.”

“The first quarter [ended Dec 31, 2016 or 1QFY17] was a bit tough for us as it was the peak [of raw material costs]. But now, we can breathe a little.”

“Our products are for the masses and for that reason, we believe increasing prices are the last thing will consider. As it is, sugar prices are moderating, so increasing prices is not on the cards.”


iPay88 online transactions hit RM6.6bil

“In the month of January 2017, we recorded a little less than two million mobile-type online payments. Moving onward to December 2017, in that month alone this number shot up to 3.5 million mobile online transactions.”

“More shoppers are now accessing the shopping sites using a mobile (device) than a desktop. iPay88 statistics show that the trend of m-Commerce has been changing since 2015. In the first quarter of 2015, desktop transactions doubled mobile transactions. Subsequently in the first quarter of 2016, mobile transactions were on par with desktop transactions.”

US tariffs to hit Malaysia PV exporters most

Malaysia has emerged as the largest exporter of PV cells and modules to the US with a market share of 25% by value and 30% by capacity in 2016, benefiting from the fall in China’s share from a peak of 59% in 2011 to 21% in 2016 after the US imposed anti-dumping and countervailing duties in 2012. The US government alleges that China’s PV manufacturers evaded these tariffs by subsequently shifting PV production to countries like Malaysia, Singapore, Germany and South Korea.

“UN Comtrade data shows outbound shipments of PV products to the US comprised 1.1% of Malaysia’s total exports in 2016. According to a Malaysia Investment Development Authority (MIDA) survey in 2016, 89% of Malaysia’s total PV production was exported.”

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